VILLAGE OF WOLVERINE LAKE Oakland County, Michigan AUDITED FINANCIAL REPORT. For the Fiscal Year Ended June 30, 2015

Transcription

1 Oakland County, Michigan AUDITED FINANCIAL REPORT For the Fiscal Year Ended June 30, 2015

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3 For the Year Ended June 30, 2015 Table of Contents INTRODUCTORY SECTION Table of Contents FINANCIAL SECTION Page Independent Auditor's Report Management s Discussion and Analysis Basic Financial Statements: Government Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Balance Sheet Proprietary Fund Statement of Revenues, Expenses, and Changes In Net Position Proprietary Fund Statement of Cash Flows Proprietary Fund Fiduciary Fund Statement of Fiduciary Net Position Notes to Financial Statements Required Supplementary Information: Schedule of Changes in the Net Pension Liability and Related Ratios Schedule of Village Pension Contributions Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Major Streets Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Local Streets Fund... 49

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5 F I N A N C I A L S E C T I O N

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7 PSLZ LLP Certified Public Accountants PLYMOUTH Dennis M. Siegner, C.P.A., C.V.A. BLOOMFIELD HILLS David R. Williamson, C.P.A WEST ANN ARBOR TRAIL Jane F. Wang, C.P.A WEST MAPLE ROAD P.O. BOX 5520 Rana M. Emmons, C.P.A. SUITE 101 PLYMOUTH, MI Jennifer A. Galofaro, C.P.A., C.V.A. BLOOMFIELD HILLS, MI Telephone (734) Susan H. Bertram, C.P.A. Telephone (248) Deborah M. Cox, C.P.A. Robert J. Sheu, C.P.A. Independent Auditor's Report To the Village President and Members of the Village Council Village of Wolverine Lake, Michigan November 5, 2015 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Village of Wolverine Lake, Michigan, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Village s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

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9 Village President and Members of the Village Council Village of Wolverine Lake, Michigan Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Village of Wolverine Lake, Michigan, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in the footnotes to the basic financial statements, in fiscal year 2015, the Village adopted the new accounting guidance of Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions. This Statement addresses accounting and financial reporting for pensions that are provided to the employees of State and Local governmental employers through defined benefit pension plans. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, the defined benefit pension plan trend information, and the budgetary comparison information, as identified in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Respectfully, PSLZ LLP Certified Public Accountants 2 PSLZ LLP Certified Public Accountants

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11 Management s Discussion and Analysis As management of the Village of Wolverine Lake, we offer readers of the Village of Wolverine Lake s financial statements this narrative overview and analysis of the financial activities of the Village of Wolverine Lake for the fiscal year ended June 30, All amounts, unless otherwise indicated, are expressed in whole dollars. Financial Highlights The assets of the Village of Wolverine Lake exceeded its liabilities at the close of the most recent fiscal year by $8,921,444 (net position). Of this amount, $1,974,876 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The Village s total net position increased by $782,421. At the close of the most recent fiscal year, the Village of Wolverine Lake s governmental funds reported combined ending fund balances of $2,553,804. Of this amount, $2,271,309 (89%) is available for spending at the government s discretion (unrestricted fund balance). At the end of the current fiscal year, unrestricted fund balance for the general fund was $2,271,309, or 84 percent of total general fund expenditures. The Village of Wolverine Lake s total bonded debt decreased by $445,000 during the current fiscal year as a result of annual debt payments made. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Village of Wolverine Lake s basic financial statements, which have three components: 1) Government-Wide Financial Statements 2) Fund Financial Statements 3) Notes to the Financial Statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Village of Wolverine Lake s finances, in a manner similar to a private-sector business. 3

12 The statement of net position presents information on all of the Village of Wolverine Lake s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Village of Wolverine Lake is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. earned but unused compensatory leave). Both of the government-wide financial statements distinguish functions of the Village of Wolverine Lake that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Village of Wolverine Lake include general government, public works, police, streets, lake management, and parks and recreation. The business-type activity of the Village of Wolverine Lake is the Water and Sewer Fund. The government-wide financial statements can be found on pages of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Village of Wolverine Lake, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Village of Wolverine Lake can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and 4

13 the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the major streets fund, and the local streets fund, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages of this report. Proprietary funds. The Village of Wolverine Lake maintains one proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Village of Wolverine Lake uses an enterprise fund to account for its Water and Sewer operation. Proprietary fund statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Water and Sewer Fund which is considered to be a major fund of the Village of Wolverine Lake. The basic proprietary fund financial statements can be found on pages of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the governmentwide financial statement because the resources of those funds are not available to support the Village of Wolverine Lake s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 20 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. 5

14 Government-wide Financial Analysis Assets exceeded liabilities by $8,921,444 at the close of the most recent fiscal year. Of the Village of Wolverine Lake s net position, 56 percent reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The Village of Wolverine Lake uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Village of Wolverine Lake's Net Position Governmental Activities Restated Business-type Activities Current and other assets $ 2,722,101 $ 2,761,002 $ 3,474,999 $ 3,820,801 $ 6,197,100 $ 6,581,803 Capital Assets 2,609,688 2,055,372 3,943,871 3,981,555 6,553,559 6,036,927 Total Assets 5,331,789 4,816,374 7,418,870 7,802,356 12,750,659 12,618,730 Total Deferred Outflows 45, ,304 - Long-term liabilities outstanding 1,553,095 1,461,820 2,082,727 2,525,669 3,635,822 3,987,489 Other liabilities 168, ,139 70,400 37, , ,218 Total Liabilities 1,721,392 1,916,959 2,153,127 2,562,748 3,874,519 4,479,707 Net Position: Net Investment in capital assets 2,609,688 2,055,372 2,354,228 2,282,916 4,963,916 4,338,288 Restricted 282, ,310 1,700,157 2,070,981 1,982,652 2,261,291 Unrestricted 763, ,733 1,211, ,711 1,974,876 1,539,444 Total Net Position $ 3,655,701 $ 2,899,415 $ 5,265,743 $ 5,239,608 $ 8,921,444 $ 8,139,023 At the end of the current fiscal year, the Village of Wolverine Lake is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. Net position increased by $782,421 during the current fiscal year. 6

15 Governmental activities. Governmental activities increased net position by $756,286. Village of Wolverine Lake - Change in Net Position Governmental Business-type Activities Activities Total Revenues: Program Revenues: Charges for Services $ 693,234 $ 510,505 $ 263,959 $ 219,494 $ 957,193 $ 729,999 Operating Grants & Contributions 324, , , ,842 Capital Grants & Contributions ,641 76,340 75,016 76,340 General Revenues: Property Taxes 1,343,448 1,307, ,343,448 1,307,544 State Shared Revenues 335, , , ,809 Franchise Fees 64,354 58, ,354 58,040 Unrestricted Investment Earnings 23,966 45,236 14,532 21,928 38,498 67,164 Special Item: Sale of Property 469, ,111 - Transfers (41,878) (43,939) 41,878 43, Total Revenues 3,211,774 2,587, , ,701 3,606,784 2,948,738 Expenses: General Government 585, , , ,128 Public Safety 779, , , ,495 Public Works 955, , , ,021 Community Development 44,308 38, ,308 38,253 Recreation and Cultural 89,949 78, ,949 78,205 Water and Sewer , , , ,272 Total Expenses 2,455,488 2,333, , ,272 2,824,363 2,715,374 Change in Net Position $ 756,286 $ 253,935 $ 26,135 $ (20,571) $ 782,421 $ 233,364 The increase in net position in the governmental activities is attributable to the fact that in the current year, the Village was able to sell a parcel of property that the Village had acquired through tax foreclosure sale in a prior year. The net proceeds of the property sale were $469,111, which was recorded as a special item in the General Fund. 7

16 Business-type activities. Business-type activities increased net position by $26,135. The increase in net position is attributable to approximately $25,000 collected in water connection fees during fiscal year Financial Analysis of the Government s Funds As noted earlier, the Village of Wolverine Lake uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Village of Wolverine Lake s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. As of the end of the current fiscal year, the governmental funds reported combined ending fund balances of $2,553,804, of which $2,271,309 (89%) constitutes unrestricted fund balance, which is available for spending at the government s discretion. Total governmental fund balances increased $247,941. The General Fund is the chief operating fund of the Village of Wolverine Lake. At the end of the current fiscal year, the total fund balance of the general fund was $2,325,923, of which $125,500 has been assigned by the Council for future park property purchases in the southern portion of the Village. The fund balance of the Village s General Fund increased by $210,370 during the fiscal year, mainly due to the sale of foreclosed property with net sale proceeds of $469,111. Proprietary funds. The Village of Wolverine Lake s proprietary fund statements provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Water and Sewer Fund at the end of the year amounted to $1,211,358. The Water and Sewer Fund reduced their debt by $445,000 in fiscal year 2015, including the payoff of Special Assessment Debt Series 2004B bonds and Series 2005A bonds. 8

17 General Fund Budgetary Highlights There was a $461,700 increase between the original budget and the final amended budget total in revenues which reflect a budget amendment of $471,000 for the property sale proceeds, and a $614,500 increase in total budgeted expenditures, including an increase to capital outlay of $509,500 for the renovations to the Village Hall project. Capital Asset and Debt Administration Capital assets. The Village of Wolverine Lake s investment in capital assets for its governmental and business type activities is $6,553,559 (net of accumulated depreciation). This investment in capital assets includes land and improvements, buildings, machinery and equipment, park facilities, roads, and bridges. The increase in the Village of Wolverine Lake s investment in capital assets for the current fiscal year was a 27 percent increase for governmental activities, and a 1 percent decrease in business-type activities. Major capital asset events during the current fiscal year included the following: Village Hall Improvements ($486,226) Park Improvements ($20,959) S Commerce Pathway ($44,289) Police Vehicle ($51,278.71) Glengary Road and Pathway ($91,125) Additional information on the Village of Wolverine Lake s capital assets can be found in note III.B on pages of this report. Long-term debt. At the end of the current fiscal year, the Village of Wolverine Lake had total bond debt outstanding of $2,085,000, which is all in the Water and Sewer Fund (businesstype activity). The Village of Wolverine Lake s total bond debt decreased by $445,000 during the current fiscal year as a result of annual principal payments made during the year. During fiscal year 2015, the Village paid off Special Assessment Bonds Series 2004B and 2005A, which had interest rates of %. Additional information on the Village of Wolverine Lake s long-term debt can be found in note III.D. on pages of this report. 9

18 Economic Factors and Next Year s Budgets and Rates Property tax revenues made up nearly 45% of total General Fund operating revenue in fiscal year Taxable values declined 22% after peaking in fiscal year 2009 and have continued to rebound. While it would now appear that property values have reached their low, the future remains uncertain with respect to the residential property market. The best case scenario would seem to indicate that values will grow over the next several years, but it should be kept in mind that Michigan law limits the growth in our tax revenue to the lower of five per cent or the rate of inflation annually. The Village also expects to see an increase in property tax revenues as a result of new residential development in the Panhandle area. With the exception of the slight dip in fund balance in fiscal year 2014, the Village has seen a healthy growth in General Fund surplus over the past several years because of the implementation of various cost saving measures, including reductions in staffing levels. Given the current economic climate, however, and the uncertainty of future state shared revenues, interest income and property taxes, the Village will have to remain steadfast in its commitment to closely monitoring its expenditures and continuing its search for other cost savings. Requests for Information This financial report is designed to provide a general overview of the Village of Wolverine Lake s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the administrative offices at 425 Glengary Road, Wolverine Lake, Michigan

19 B A S I C F I N A N C I A L S T A T E M E N T S PSLZ LLP Certified Public Accountants

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21 Statement of Net Position June 30, 2015 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash and Cash Equivalents $ 2,609,888 $ 1,194,235 $ 3,804,123 Restricted Assets - Cash - 495, ,767 Receivables: Accounts - 36,124 36,124 Special Assessments - 1,700,157 1,700,157 Due from Other Governmental Units 112, ,213 Inventory - 39,810 39,810 Prepaid Expenses - 8,906 8,906 Capital Assets (net of accumulated depreciation) 2,609,688 3,943,871 6,553,559 Total Assets 5,331,789 7,418,870 12,750,659 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows related to Pensions 45,304-45,304 LIABILITIES Accounts Payable 133,740 70, ,140 Unearned Revenue 34,557-34,557 Noncurrent Liabilities: Net Other Post Employment Benefit Liability 46,356-46,356 Compensated Absences 24,225-24,225 Net Pension Liability 1,482,514-1,482,514 Due within one year - 370, ,000 Due in more than one year - 1,712,727 1,712,727 Total Liabilities 1,721,392 2,153,127 3,874,519 NET POSITION Net Investment in Capital Assets 2,609,688 2,354,228 4,963,916 Restricted for: Streets 216, ,950 Police Drug Forfeiture 10,931-10,931 Building 54,614-54,614 Debt Service - 1,700,157 1,700,157 Unrestricted 763,518 1,211,358 1,974,876 Total Net Position $ 3,655,701 $ 5,265,743 $ 8,921, The notes to the financial statements are an integral part of this statement.

22 Statement of Activities For the Year Ended June 30, 2015 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Functions/Programs Primary Government: Governmental Activities: General Government $ 585,635 $ 104,768 $ 5,343 $ 375 Public Safety 779, ,987 42,322 - Public Works 955, , ,485 - Community Development 44,308 21, Recreation and Cultural 89,949 11, Total Governmental Activities 2,455, , , Business-type Activities: Water and Sewer 368, ,959-74,641 Total Primary Government $ 2,824,363 $ 957,193 $ 324,150 $ 75,016 General Revenues: Property Taxes State Shared Revenue Interest Earnings Franchise Fees Special Item-Proceeds from Sale of Property Transfers Total General Revenues, Special Item, and Transfers Change in Net Position Net Position - Beginning, as restated Net Position - Ending 12 The notes to the financial statements are an integral part of this statement.

23 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total $ (475,149) $ - $ (475,149) (553,313) - (553,313) (307,616) - (307,616) (23,032) - (23,032) (78,619) - (78,619) (1,437,729) - (1,437,729) - (30,275) (30,275) (1,437,729) (30,275) (1,468,004) 1,343,448-1,343, , ,014 23,966 14,532 38,498 64,354-64, , ,111 (41,878) 41,878-2,194,015 56,410 2,250, ,286 26, ,421 2,899,415 5,239,608 8,139,023 $ 3,655,701 $ 5,265,743 $ 8,921, The notes to the financial statements are an integral part of this statement.

24 Balance Sheet Governmental Funds June 30, 2015 ASSETS Other Governmental Funds Total Drug Governmental General Major Streets Local Streets Forfeiture Funds Cash and Cash Equivalents $ 2,419,011 $ 153,838 $ 26,108 $ 10,931 $ 2,609,888 Due from State 55,195 30,173 26, ,213 Total Assets $ 2,474,206 $ 184,011 $ 52,953 $ 10,931 $ 2,722,101 LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable $ 113,726 $ 19,116 $ 898 $ - $ 133,740 Unearned Revenue 34, ,557 Total Liabilities 148,283 19, ,297 Fund Balances: Restricted for: Streets - 164,895 52, ,950 Police Drug Forfeiture ,931 10,931 Building Department 54, ,614 Assigned for: Park Property 124, ,500 Unassigned 2,146, ,146,809 Total Fund Balance 2,325, ,895 52,055 10,931 2,553,804 Total Liabilities and Fund Balance $ 2,474,206 $ 184,011 $ 52,953 $ 10,931 Amounts reported for governmental activities in the statement of net position are different because: Capital Assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 2,609,688 Net Other Post Employment Benefit Liability (46,356) Compensated absences are included as a liability in governmental activities. (24,225) Net Pension Liabilities are not reported in the funds (1,482,514) Deferred Outflows related to Pensions 45,304 Net Position of Governmental Activities $ 3,655, The notes to the financial statements are an integral part of this statement.

25 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds For the Year Ended June 30, 2015 Other Governmental Funds Total Drug Governmental General Major Streets Local Streets Forfeiture Funds Revenues Property Taxes $ 1,343,448 $ - $ - $ - $ 1,343,448 Intergovernmental: Federal, State and Local 382, ,138 98, ,914 Licenses and Permits 167, ,679 Charges for Services 378, ,837 Fines and Forfeitures 16, ,308 Franchise Fees 64, ,354 Interest Earned 22,193 1, ,966 Other 108,180 13,292 13, ,035 Total Revenues 2,483, , , ,784,541 Expenditures General Government 518, ,272 Public Safety 773, ,904 Public Works 667, , , ,923 Community Development 44, ,308 Recreation and Cultural 77, ,643 Capital Outlay 618, ,783 Total Expenditures 2,700, , ,067-2,963,833 Excess (Deficiency) of Revenues Over Expenditures (216,863) 44,975 (7,407) 3 (179,292) Other Financing Sources(Uses): Transfers In ,000-15,000 Transfers Out (41,878) (15,000) - - (56,878) Total Other Financing Sources(Uses) (41,878) (15,000) 15,000 - (41,878) Special Item: Proceeds from Sale of Property 469, ,111 Net Change in Fund Balance 210,370 29,975 7, ,941 Fund Balance - Beginning 2,115, ,920 44,462 10,928 2,305,863 Fund Balance - Ending $ 2,325,923 $ 164,895 $ 52,055 $ 10,931 $ 2,553, The notes to the financial statements are an integral part of this statement.

26 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2015 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balance - total governmental funds $ 247,941 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period. Capital Outlay 618,783 Capital Outlay-Departmental 92,057 Depreciation (156,524) Change in Net Pension Liability (39,942) Change in Net Other Post Employment Benefit Liability (6,769) Decrease in accumulated employee sick and vacation pay, as well as estimated general liability claims, are recorded when earned in the statement of activities. 740 Change in net position in governmental activities $ 756, The notes to the financial statements are an integral part of this statement.

27 Balance Sheet Proprietary Fund June 30, 2015 ASSETS Enterprise Fund Water & Sewer Current Assets: Cash and Cash Equivalents $ 1,194,235 Restricted Assets - Cash 495,767 Receivables: Accounts 36,124 Special Assessments 1,700,157 Inventory 39,810 Prepaid Expenses 8,906 Total Current Assets 3,474,999 Capital Assets 4,882,071 Less: Accumulated Depreciation (938,200) Net Capital Assets 3,943,871 Total Assets $ 7,418,870 LIABILITIES AND NET POSITION Current Liabilities: Accounts Payable $ 70,400 Current Portion of Bonds Payable 370,000 Total Current Liabilities 440,400 Long-Term Liabilities: Special Assessment Bonds Payable, net of unamortized discount 1,712,727 Total Liabilities 2,153,127 Net Position: Net Investment in Capital Assets 2,354,228 Restricted for Debt Service 1,700,157 Unrestricted 1,211,358 Total Net Position 5,265,743 Total Liabilities and Net Position $ 7,418, The notes to the financial statements are an integral part of this statement.

28 Statement of Revenues, Expenses and Changes in Net Position Proprietary Fund For the Year Ended June 30, 2015 Enterprise Fund Water & Sewer Operating Revenues: Water and Sewer Sales $ 78,645 Miscellaneous 185,314 Total Operating Revenues 263,959 Operating Expenses: Personal Services 27,331 Supplies 923 Repairs and Maintenance 9,761 Utilities 5,426 Other Services and Supplies 154,447 Depreciation and Amortization 104,433 Total Operating Expenses 302,321 Operating Income (Loss) (38,362) Non-Operating Revenues (Expenses): Interest Income from Special Assessments 74,641 Interest Income from Investments 14,532 Interest Expense and Related Fees (66,554) Total Non-Operating Revenues (Expenses) 22,619 Income (Loss) Before Transfers (15,743) Operating Transfer In 41,878 Net Income (Loss) 26,135 Net Position, Beginning 5,239,608 Net Position, Ending $ 5,265, The notes to the financial statements are an integral part of this statement.

29 Statement of Cash Flows Proprietary Fund For the Year Ended June 30, 2015 Enterprise Fund Water & Sewer CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers and Users $ 260,627 Payments to Suppliers (105,388) Payments to Employees (27,331) Net Cash Provided by Operating Activities 127,908 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer from Other Funds 41,878 Net Cash Provided by Noncapital Financing Activities 41,878 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Capital Debt (445,000) Interest Paid on Capital Debt (66,554) Construction of Capital Assets (64,691) Collection on Special Assessments - Principal 370,824 Collection on Special Assessments - Interest 74,641 Net Cash Provided (Used) by Capital and Related Financing Activities (130,780) CASH FLOWS FROM INVESTING ACTIVITIES Interest Earned 14,532 Net Increase (Decrease) in Cash and Cash Equivalents 53,538 Cash and Cash Equivalents, Beginning 1,636,464 Cash and Cash Equivalents, Ending $ 1,690,002 Balance Sheet Classifications: Cash and Cash Equivalents $ 1,194,235 Restricted Assets - Cash 495,767 Total $ 1,690,002 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) $ (38,362) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization Expense 104,433 (Increase) Decrease in Accounts Receivable (3,332) (Increase) Decrease in Inventory 31,848 Increase (Decrease) in Accounts Payable 33,321 Net Cash Provided (Used) by Operating Activities $ 127, The notes to the financial statements are an integral part of this statement.

30 Statement of Fiduciary Net Position Fiduciary Fund June 30, 2015 Agency Fund ASSETS Cash $ 87,849 LIABILITIES Due to Other $ 87, The notes to the financial statements are an integral part of this statement.

31 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Village of Wolverine Lake, Michigan is governed by an elected seven-member council. The accompanying financial statements present the Village. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e. the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenue. Separate financial statements are provided for governmental funds, the proprietary fund, and fiduciary fund, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and Enterprise Fund are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. 21

32 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Continued Revenues are considered to be available if they are collected within 60 days of the end of the current fiscal period. The following major revenue sources meet the availability criterion: state-shared revenue, state gas and weight tax revenue, district court fines, and interest associated with the current fiscal period. Conversely, special assessments and federal grant reimbursements will be collected after the period of availability; receivables have been recorded for these, along with a deferred revenue liability. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Governmental Funds The Village reports the following major governmental funds: The General Fund is the Village's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Major Streets Fund is a special revenue fund used to account for the resources of state gas and weight tax revenues that are restricted for use on major streets. The Local Streets Fund is a special revenue fund used to account for the resources of state gas and weight tax revenues that are restricted for use on local streets. The Village reports the following major proprietary fund: The Water and Sewer Fund accounts for the activities of the water distribution system and sewage collection system. Additionally, the Village reports the following fund types: Special Revenue Funds are used to account for the proceeds of earmarked revenue or financing activities requiring separate accounting because of legal or regulatory provisions. Agency Funds are used to account for assets held by the Village in a trustee capacity. Agency Funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. 22

33 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Continued As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements, and when both restricted and unrestricted resources are available for use, it is the Village s policy to use restricted resources first, then unrestricted resources as needed. Amounts reported as program revenue include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes. Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services in connection with a proprietary fund s principal ongoing operations. The principal operating revenue of our proprietary fund relates to charges to customers for sales and services. The Water and Sewer Fund also recognizes the portion of tap fees intended to recover current costs (e.g., labor and materials to hook up new customers) as operating revenue. The portion intended to recover the cost of the infrastructure is recognized as nonoperating revenue. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 23

34 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued D. Assets, Liabilities and Net Position or Equity 1. Deposits and Investments The Village's cash and cash equivalents are considered to be cash on hand, demand deposits and short term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the Village to invest in obligations of the U.S. Treasury, commercial paper of certain investment grades, and deposits of Michigan commercial banks. Investments for the Village are recorded at fair value. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e. the current portion of interfund loans) or "advances to/from other funds" (i.e. non-current portion of interfund loans). All trade and property tax receivables are shown as net of allowance for uncollectible amounts. 3. Restricted Assets The Village s remaining bond proceeds are set aside for various upcoming debt service payments. These amounts have been classified as restricted. 4. Capital Assets Capital assets, which include property, plant, equipment, vehicles and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the government-wide or business-type activities column in the government-wide financial statements. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant and equipment of the Village are depreciated using the straight line method over the following estimated useful lives: Assets Years Roads 20 Water Meters and Equipment 10 Sewer Treatment Facilities Water Mains Buildings and Improvements Vehicles

35 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued D. Assets, Liabilities and Net Position or Equity Continued 5. Inventory Inventories are valued at cost using the first-in/first out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased. 6. Prepaid Expenses Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. 7. Compensated Absences It is the Village s policy to permit employees to accumulate earned but unused sick and vacation pay benefits. A liability for these amounts is reported in governmental funds only for employee terminations as of year end. 8. Long-term Obligations In the government-wide financial statements and the proprietary fund type in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, businesstype activities, or proprietary fund-type statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures. 9. Fund Balance In the fund financial statements, governmental funds report the following components of fund balance: Nonspendable Amounts that are not in spendable form or are legally or contractually required to be maintained intact. 25

36 Notes to Financial Statements June 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued D. Assets, Liabilities and Net Position or Equity Continued 9. Fund Balance Continued Restricted Amounts that are legally restricted by outside parties, constitutional provisions, or enabling legislation for use for a specific purpose. Committed Amounts that have been formally set aside by the Council for use for a specific purpose. Commitments are made and can be rescinded only via resolution of the Village Council. Assigned Intent to spend resources on specific purposes expressed by the governing body. Unassigned This is the residual classification for the general fund. This classification represents fund balance that has not been restricted, committed, or assigned to specific purposes within the general fund. II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information The Village is legally subject to the budgetary control requirements of the State of Michigan P.A. 621 of 1978 (Uniform Budgeting Act). Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. The following is a summary of the requirements of this act: 1. Budgets must be adopted for the General and Special Revenue Funds. 2. Budgets must be balanced. 3. Budgets must be amended as necessary. 4. Public hearings must be held prior to adoption. 5. Expenditures cannot exceed budget appropriations. 6. Expenditures must be authorized by a budget appropriation prior to being incurred. The annual budget is prepared by the Village s management and adopted by the Village Council on an activity basis; subsequent amendments are approved by the Village Council. Expenditures in excess of amounts budgeted are in violation of Michigan law. Unexpended appropriations lapse at year end and encumbrances are not included as expenditures, but are reappropriated as part of the subsequent year budget. During the current fiscal year, the Village Council authorized budget amendments, which are reflected in the financial statements. 26

37 Notes to Financial Statements June 30, 2015 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Continued B. Compliance with P.A. 621 of Deficit Fund Balance The Village has no deficit fund balances as of June 30, Excess of Expenditures Over Appropriations in Budgetary Funds The Village did not have excess expenditures over appropriations on the activity basis as June 30, C. Public Act 245 of 1999 Compliance In accordance with the State Construction Code Act, Public Act 245 of 1999, the Village must account for cumulative revenues over or under expenditures generated by the Village s building department from January 1, 2000 and forward. The cumulative amounts as of June 30, 2015 are as follows: Cumulative Surplus(Deficit) at June 30, 2014 $ (22,284) Fees Collected in Fiscal Year ,679 Expenditures in Fiscal Year 2015 (90,781) Revenues Over (Under) Expenditures 76,898 Cumulative Surplus(Deficit) at June 30, 2015 $ 54,614 27

38 Notes to Financial Statements June 30, 2015 III. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments Under State law, the Village is permitted to invest in deposits with Michigan commercial banks, savings and loans and credit unions, obligations of the U.S. Treasury, and corporate bonds and commercial paper with certain investment grades. The following information, as required by the Governmental Accounting Standards Board Statement Number 40 is presented, regarding the Village's deposits and investments: Custodial Credit Risk is the risk that in the event of a bank failure, the Village's deposits may not be recovered. Neither State law nor the Village's investment policy requires consideration of custodial credit risk. As of June 30, 2015, the Village s book balance of its deposits was $4,387,239; the total book balance was $4,387,739, due to $500 in cash on hand. The bank balance was $4,439,463 which was exposed to custodial credit risk, as follows: Bank Balance Insured by F.D.I.C. $ 263,359 Uninsured and Uncollateralized 4,176,104 Total $ 4,439,463 A reconciliation of cash as it appears on the financial statements follows: Cash and Cash Equivalents per: Statement of Net Position: Cash and Cash Equivalents $ 3,804,123 Restricted Assets-Cash 495,767 Fiduciary Fund Statement of Assets and Liabilities 87,849 Total $ 4,387,739 Credit Risk. State law limits investments in commercial paper, corporate bonds, and mutual bond funds to the top two ratings issued by nationally recognized statistical rating organizations. The Village has no investment policy that would further limit its investment choices. 28